FRAUD ON CAMPUS

1. FRAUD ON CAMPUS John F. Riley, C.P.M.

2. Fraud? • We are being robbed right now! • Prove it! • Prove we are not!

3. Extent • Hard to estimate for Higher Education. • We do not want to talk about it. • Want our students to think tuition well spent. • Want our legislators to appropriate more. • Want our sponsors to fund more research. • Want our alumni to keep us in the will.

4. Occupational Fraud 2012 • 5% of revenues, or $3.5 trillion. • 64% committed by employees. • Employee $ 60,000 • Manager $180,000 • Executive $573,000

5. Occupational Fraud 2012 • 77% of all frauds in six departments: • Accounting • Operations • Sales • Executive, Upper Management • Customer Service • Purchasing

6. Occupational Fraud 2012 • 43.3% of all frauds identified through a tip.

7. Higher Education • No real data. • But, lots of under appreciated people. • Significant opportunities. • Complex systems. • Open access. • A reluctance to prosecute. • Or even announce what we find.

8. Stories

9. Fax Machines • Call from local chain store. • Gave refund on a fax machine. • But funny feeling about it. • Got employee’s name. • Looked at Limited Value Purchase Orders. • Seventeen fax machines. • Called department to inventory.

10. K-Mart • Call from local K-Mart. • “Why won’t you people pay your PO?” • PO Number not one of ours. • “It must be yours, it’s got Sparky on it.”

11. Pirates • Call from department. • Received a box of two toner cartridges. • Invoice of $640. • Already used them. • Stores price for two was $110. • Refused to pay, and sent two from Stores.

12. Thirteenth Floor • Department called and said to check a specific person’s travel reimbursement. • Looked fine. • Receipts all there. • Just to make sure, called hotel. • Only have four floors. • Receipt was for Room 1313.

13. Invoice • I-Pages. • American Internet Directories. • Just two of many.

14. Cashier’s Check • Bookstore received an order for books. • To be shipped to Nigeria. • $8,700 total. • Credit Card number. • Not a valid number. • Customer provided another Credit Card. • Also not valid.

15. Cashier’s Check • Bookstore still trying to help the customer. • Asked for a Cashier’s Check. • Received it the next morning via FedEx. • No watermark. • Called issuing Bank of America. • Counterfeit. • Told the customer his order was cancelled.

16. Audit Hacker • Purchasing Card Audit. • Auditor given system access. • Noticed cursor moving on its own. • Audit had disabled all virus protection. • Immediately notified bank. • No problems.

17. Hacker • An intrusion at a major university resulted in access to all purchasing card records, and all travel reimbursement requests, with SSAN’s. • Reissue 1,000 purchasing cards.

18. Property • Dear Person in Department, • Where is the $7,590 electric cart you bought in January? • And the $40,606 video camera control box signed out from State Surplus? • I don’t know is not good enough.

19. Purchasing Card • Dear Cardholder, please explain: • Roomateacess.com, $39.99 • Service Arizona, $222.67 • Victoria Secret, $125.05 • On a Sponsored Account.

20. Purchasing Card • “The Service Arizona was, I regret to say, intentional. The other two were a mistake as I grabbed the wrong card. My Dean understands that it was a mistake, and only asks that it be paid back.” • “Can you deduct this over my next 6 paychecks?”

21. Purchasing Card • “I’m sorry about this and can only hope that it be handled quietly, and to the benefit of all parties.” • Do you think we agreed to 6 payments? • Or handled it quietly?

22. Purchasing Card • Immediately ratted her out to Dean, Business Manager, Internal Audit, HR, General Counsel. • Complete audit of all $14,780 transactions. • $1,131 were fraudulent. • $1,131 was recovered, • Just before employee fired.

23. Purchasing Card, Part 2 • Administrative Assistant conspired with faculty member to submit fake computer invoices to Foundation for reimbursement. • Some $17,000. • Also had a Purchasing Card. • Total spend was $1,308. • Asked to produce all receipts.

24. Purchasing Card, Part 2 • Failed to produce receipts. • Probably because had other things to worry about. • We deducted $1,308 from her last paycheck. • Prosecuted both. • Judgment against both.

25. Purchasing Card, Part 2 • End of the story? • Hardly. • Asked what we were doing to prevent this, and tighten up on Purchasing Card program. • How would the Purchasing Card program prevent someone from sending fake invoices to the Foundation.

26. Stores • Most batteries are sold in December. • Most flashlights are sold in October. • How to sell to ASU: • Doughnuts. • Hot dogs.

27. Cash • Always trying to balance receipts to register to inventory. • Noticed that ran low on ice at the bar. • Person would bring in ice from another machine. • Slipped a bottle of liquor from the package store into the ice. • Sold over the bar, and the money pocketed.

28. Cash • One bottle missing from package store was not noticeable. • Money kept from drinks sold not rung through register. • Each bartender had locked cabinet. • Empty bottles tracked.

29. Cash • Unannounced cash count of petty cash. • Contained neatly written IOU. • Person fired.

30. Cash • Unannounced cash count at a Copy Center. • $1,100 in the safe. • In $20’s. • Proposed termination. • Hurt back the day before, out on Worker’s Comp.

31. Cash • Went to a hearing. • Administrative judge did not want to hear about the $1,100, or the timing. • Continued the person on Worker’s Comp. • No longer worked for us.

32. No Experience Required • Friend will only hire inexperienced bartenders. • Because experienced ones know how to steal. • One day, no choice. • Thought something wrong. • Could not figure it out.

33. No Experience Required • Looked for counting system. • Could not find one. • So, asked an investigator to review. • Sat there for a week as customer. • Reported that he also had a funny feeling, but could not see the problem. • Rings up everything in one of the two registers.

34. Moonlighting • Payment to an individual to maintain computers. • Also an employee. • Did a solicitation. • Employee won. • Same hours as regular job?

35. Mall Vendors • Local copy center booth on the mall. • Introduced self as Prof Johnson. • Do you give rebates on course packs? • Sure.

36. Vending • Gumball type candy machines. • Arizona Charities. • No contract. • And no such entity. • Confiscated.

37. Lots of Experience Required • Wanted a marketer. • Highly qualified person who had worked at a radio station. • Unfortunately, the station had closed, so now here looking for work. • Total fabrication. • Fired when discovered.

38. Theft from Lockers • Woman stole credit cards from gym lockers. • Nothing special about that. • Then approached students and said was investigating the theft. • And needed to know the account access numbers.

39. Purchasing Adventure • College did an RFP. • To select next standard server. • Sent e-mail saying that if firm kept their local rep, they would not get the business. • Award announced. • Call from local rep to complain.

40. Purchasing Adventure • Local rep could have grounds for a suit. • Met with College staff. • Advised to immediately write to all firms. • Advised to retain an attorney.

41. Purchasing Adventure • College then came back with specs. • We did solicitation. • College wanted to make multiple award. • So they could steer business to favorite. • When this did not work, College asked if could buy from State contract. • Sure.

42. Another Purchasing Adventure • On data conversion job, we did a solicitation. • Winning firm later released by College. • College decided could do the job themselves. • Then hired three consultants. • This was not working either.

43. Another Purchasing Adventure • Sent us a letter to say a firm was a sub-contractor in a State contract. • We issued PO. • Firm fired three consultants. • One of whom ratted on them. • Big audit.

44. Another Purchasing Adventure • Over spent $80,000. • Resignation in lieu of termination. • Referred to County Prosecutor. • Not enough to prosecute, but could sue. • Senior administration asked to prove no one else doing this. • New approval policy for IT projects.